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Interest Only Home Mortgages

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An exotic mortgage. mortgages, make up a small part of the mortgage market. In a declining housing market where home prices are decreasing, homeowners cannot sell their homes or refinance to get.

An interest-only loan is a loan in which the borrower pays only the interest for some or all of the term, with the principal balance unchanged during the interest-only period. At the end of the interest-only term the borrower must renegotiate another interest-only mortgage, pay the principal, or, if previously agreed, convert the loan to a principal-and-interest payment loan at the borrower’s.

Here’s an example: For a $300,000, 30-year mortgage with a 10-year, interest-only period at a 5 percent interest rate, your interest-only monthly payment would be $1,250.00.

A significant down-payment will reduce the risk factor on an interest-only mortgage. A drop in the property market can result in the loss of equity on the property. Once again, the risks associated with a decline in the property market is run by all homeowners whether they opt for an interest-only mortgage or a home loan that is fully amortized.

What appears to be a good deal may not be once you look closer at fees and interest rates. [read: Best Personal Loans. "A person can only borrow so much money," Fisher says.

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What is an Interest-Only Mortgage? With a traditional mortgage, buyers pay some part of the principal and interest with every monthly payment. An interest-only mortgage loan allows borrowers to pay only the interest on the loan for a fixed period of time – usually 5 to 7 years – and then must begin paying off the principal.

Interest-Only Mortgage Calculator. This tool helps buyers calculate current interest-only payments, but most interest-only loans are adjustable rate mortgages (arms). When the housing market is hot many people chase it, buying near the peak with interest-only loans. If home prices continue to climb, one can refinance at a lower rate. However if.